Middlesex University
Financial Statements 2015/16
Investment income and appreciation of endowments is recorded in income in the year in which it arises and as either restricted or unrestricted income according to the terms of the restriction applied to the individual endowment fund.
There are four main types of donations and endowments identified within reserves:
1. Restricted donations – the donor has specified that the donation must be used for a particular objective.
2. Unrestricted permanent endowments – the donor has specified that the fund is to be permanently invested to generate an income stream for the general benefit of the University.
3. Restricted expendable endowments – the donor has specified a particular objective other than the purchase or construction of tangible fixed assets, and the University has the power to use the capital.
4. Restricted permanent endowments – the donor has specified that the fund is to be permanently invested to generate an income stream to be applied to a particular objective.
f. Agency arrangements
Funds the University receives and disburses as paying agent on behalf of a funding body (or other body) are excluded from the Consolidated Statement of Comprehensive Income and Expenditure of the University where the University is exposed to minimal risk or enjoys minimal economic benefit related to the transaction. The balances and movement of these funds are disclosed in notes 31 to 34.
g. Accounting for Retirement Benefits The University contributes to two principal staff pension schemes – for the University’s staff are the Teachers’ Pension (TP), independently administered by the Department for Education (DfE) and the Local Government Pension Scheme (LGPS), independently administered by the London Borough of Barnet.
The schemes are defined benefit schemes which are externally funded and for the period up to 5th April 2016 were contracted out of the State Second Pension (S2P) when contracting-out ceased on the introduction of the Governments new state pension on 6th April 2016.
Each fund is valued every three years by professionally qualified independent actuaries.
Both schemes provide defined benefits to members (retirement lump sums and pensions), earned as employees worked for the University. However, the arrangements for the Teachers’ Pension mean that liabilities for these benefits cannot ordinarily be identified specifically to the University. The scheme is therefore accounted for as if it was a defined contribution scheme and no liability for future payments of benefits is recognised in the Balance Sheet.
Defined Contribution Scheme
A defined contribution scheme is a pension scheme under which the University pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. The University’s obligations for contributions to the Teachers’ Pension whilst being a defined benefit scheme is treated as a defined contribution scheme as explained above and are recognised as an expense in the Consolidated Statement of Comprehensive Income and Expenditure in the periods during which services are rendered by employee members.
Defined Benefit Scheme
Defined benefit schemes are pension schemes other than defined contribution schemes. Under defined benefit schemes, the University’s obligation is to provide the agreed benefits to current and former employees, and actuarial risk (that benefits will cost more or less than expected) and investment risk (that returns on assets set aside to fund the benefits will differ from expectations) are borne, in substance, by the University. The Group recognises a liability for its obligations under the LGPS net of plan assets. This net defined benefit liability is measured as the estimated amount of benefit that employees have earned in return for their service in the current and prior periods, discounted to determine its present value, less the fair value (at bid price) of scheme assets. The calculation is performed by a qualified actuary using the projected unit credit method. Where the calculation results in a net asset, recognition of the asset is limited to the extent to which the University is able to recover the surplus either through reduced contributions in the future or through refunds from the scheme.
Other pension benefits
The University continues to make a small and diminishing number of supplementary payments to former staff and dependants of those staff, who took early retirement during the 1990’s. The liabilities of the pension enhancement can be estimated under FRS 102 and are included in the financial statements at note 21.
h. Employment Benefits
Short term employment benefits include benefits payable during employment such as salaries and compensated absences (e.g. paid annual leave) and are recognised as an expense in the year in which the employees render service to the University.
Short term employee benefits are those due to be settled within 12 months of the year-end date.
Any unused benefits are accrued and measured as the additional amount the University expects to pay as a result of the unused entitlement.
An accrual is made for the cost of annual leave entitlements earned by employees but not taken before the year end which employees can carry forward into the next financial year.
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